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As companies seek new markets to conquer, they’re more often setting up operations in countries outside the US. These expansion plans are often accompanied by the need to hire employees based in these new locales. It can be a complicated process, though, particularly if your company is venturing into global markets for the first time.
If you’re looking at overseas opportunities or already transitioning your operations to a country outside the US, this guide can help you navigate the often tricky waters of global payroll management.
International payroll is simply the process of paying employees based in other countries. These employees either work out of offices your company maintains or remotely as part of a distributed team of staff or contractors.
While many international companies choose to outsource their international payroll, today’s online money specialists offer powerful tools you can easily integrate into your existing software, often at lower rates and fees than you’ll find with a bank or third-party vendor.
When setting up international payments for employees or contractors, you’ll want to think about:
When you’re looking to save money on the exchange rate, look beyond the rate itself:
Learn more in our our comprehensive guide to international business transfers
There are essentially three types of payroll solutions that companies can use: The DIY approach with payroll software, payroll services that handle the entire process for you and money transfer providers that actually send the money to your employees.
There are a couple of DIY solutions to your payroll needs, including payroll software as well as sites that allow you to pay freelancers through their own platform.
Payroll software can help unify your payroll process to maximize efficiency. When choosing payroll software, ensure that the software you use can handle international payments, that it’s compliant with financial reporting and record-keeping regulations and that it can offer in-country expertise.
If you’re looking to get out of having to handle payroll entirely, sites like Upwork offer access to a vast pool of freelancers that you can pay through the platform. Upwork arranges the contracts between your company and the freelancers you hire, and ensures your compliance with current regulations.
There are companies like ADP that you can use to process your entire payroll for you, which frees up your time so you can focus on bigger projects. These services simplify your payroll process into one automated solution so that it maximizes efficiency and there’s less room for manual errors.
They’ll also stay on top of the ever-changing rules and regulations of payroll policies in the countries your employees are working in to ensure you stay compliant. Many even have systems that sync your payroll data with other solutions, like time tracking and benefits.
Lastly, you’ll find money transfer providers like Payoneer and PayPal that help you transfer the money to your employees. Often, even if you use a payroll service, you still need a money transfer specialist to make the payment to the processor. Typically with these money transfer providers, you’ll sign up for an account that allows you to send and receive payments, which your recipients can then withdraw from their local bank.
Some of these providers have the option of setting up automated payments and batch payments to make the transfer process that much easier. For example, PayPal offers a full range of business services, including batch payments and immediate transfers, in more than 200 countries.
You can also consider local payment options, if available. For example, if you have employees in the Philippines, you can use the PayMaya mobile app. This allows you to send money from your bank account to your employees’ PayMaya accounts. A local bank account that supports PayMaya is a prerequisite in this case.
Name | Ideal company size | List of services | Prices starting at |
---|---|---|---|
Payoneer | Small to large companies, with a $20 minimum transfer amount | Receive payments, make payments, send mass payments, set up automated payments, make secure B2B transactions with escrow payments |
|
TransferMate | Medium to large companies, since the minimum transfer amount is EUR 1,000 and there’s no maximum transfer amount | Make payments, request payments, send batch payments |
|
Halo Financial | Small to large companies, with a $250 minimum transfer amount and no fees for transfers over EUR 5,000 | Regular payments, one-off payments |
|
Paysera | Small to large companies | Make payments, receive payments, sell event tickets |
|
PayPal | Small to large companies | Make payments, receive payments, request payments, one-off payments, bulk payments | Because PayPal tailors its tools to your needs, you’ll need to speak to a representative to learn more about its fees for merchant services |
CloudPay | Companies with operations in at least two countries and 50 employees | Managed payroll services that can integrate with human capital management (HCM) and enterprise resource planning (ERP) software, payroll data analytics, compliance services | Contact sales for more information on its services |
ADP | From single-employee companies to multinational corporations with thousands of employees | Online payroll solutions with automatic tax filing and computation of health benefits and retirement contributions, seamless integration with time and attendance tracking as well as all major accounting programs, offers a combined payroll service with human resources (HR) package | Contact sales for a free quote |
When narrowing down your international payment options, compare the suite of business services against:
When you’re running an international business, every opportunity to save matters. Many online companies allow you to lock in exchange rates and otherwise protect your payments through specialized services that include:
Whether you decide to use a payroll service like ADP or go the DIY approach with payroll software, you may still need to use a money transfer specialist to actually make the payment to the processor. Check with the payroll service or software you’re using to see if you should set up an account with an international money transfer provider.
When deciding which payroll solution is best for your business, you should ensure that you know about the following:
Other areas to work out before employing staff in other countries:
The process of international payments varies across software, providers and whether you’ve integrated these transfers into your in-house system.
Most online money transfer specialists follow general steps:
With bulk payments, you send send individual payments to multiple employees in one transaction.
You can either input the details into a system manually or, for more convenient payments, upload a spreadsheet or other data source containing the names of the employees and the amount owed to each.
PayPal, TransferWise and many other online providers will allow you to integrate APIs that can streamline bulk payments through your existing accounting software.
Each country has its own laws that govern business and protect employees — some more nuanced than others. For instance, although the EU recommends no more than 48 hours in a workweek, France adopted a measure that enforces no more than 35 hours a week. And in Australia, employees are required to report large money transfers to the government or face a penalty.
Make sure that you understand the laws that govern payroll taxes and employment specifically, even if you don’t plan to open an office overseas. If you don’t comply with the law, you could be subject to steep fines and criminal penalties.
Top 5 countries that the US outsources work to as of 2013:
It’s easy for a company to think that it’s OK to avoid taxes and other deductions if they operate solely out of the US. But if you’re paying employees or contractors who live in other countries, you run this risk of criminal liability if you choose to look the other way.
One of the biggest deductions to consider for your overseas employees are taxes. Typically, companies deduct required taxes from an employee’s wages at the time of payment, with employers filing other taxes directly to their home country’s government annually.
Like other legal requirements, each country enacts its own laws that govern payroll taxes. Take time to understand the payroll tax regulations of each country an employee lives in, or hire a professional who does.
Before signing on with a third-party service or provider, ask how it helps you stay compliant with local taxes. Doing so can help you avoid the hefty fines that come with failing to comply with local regulations.
If you’re looking to expand your business into other countries, you’ll need to contend with how you’ll pay the employees or contractors who work for you.
Understand the employment and tax regulations within each country your employees live in to avoid fines and other penalties that come with failing to comply with the law.
Look for an international payroll system or money transfer specialist with the expertise to work with businesses like yours. They’re your best bet for the strongest exchange rates and lowest transaction fees you’re eligible for, keeping more of your hard-earned cash with your business.
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